Big Promises: Ghana Election Special

Ghana’s new government promised change – what does it mean for the oil and gas sector?

Just weeks into the start of Ghana’s New Patriotic Party government, and the changes for the oil and gas industry are already piling up — new government officials have been appointed, new leadership positions for state-owned companies announced and a new energy ministry created.

When former President John Mahama conceded defeat in the presidential elections to Nana Akufo-Addo of the New Patriotic Party (NPP) in December, Ghana prepared for changes in every sector, as Akufo-Addo and the NPP ran the election on a platform on exactly that message — change. The party’s promises include fighting corruption, cutting taxes, boosting free market growth and promoting the development of a more diversified economy.

Key sectors headed for a shakeup are most certainly the oil and gas and power sectors. Ghanaians have not seen benefits from oil and gas production that started in 2010, claims the NPP, and the party’s leaders fear Ghana is on track to become a country cursed by oil.

“The discovery of oil has not made any difference in the lives of most Ghanaians, except for a small group of friends and family around the President,” states the party in its Election Manifesto, pledging to modify the regulations.

As for power, Ghana has been plagued by persistent and unpredictable power outages — dubbed “dumsor” — and the lack of consistent power delivery is hampering industrial growth. The NPP vowed to focus on power and open up the sector to investment.

And while the new president’s promises sound good, the challenges are also daunting, as Akufo-Addo takes charge in a country with high public debt and inflation; a severe lack of power generation infrastructure; and amid a global environment of low oil and gas prices — all in the context of a three-year aid program for Ghana from the International Monetary Fund that includes strict austerity measures to secure a $918 million bailout.

Though the many changes promised for the oil and gas sectors will take time to implement, the party is starting with a key advantage: not only winning the presidency, but also a majority of seats in parliament, making future policy changes easier to implement.

No hanging around

Akufo-Addo, sworn into office on Jan. 7, is wasting no time tackling these issues, announcing on Jan. 11 that he is merging the Ministry of Power and the Ministry of Petroleum into one department: the Ministry of Energy, Petroleum and Power. He also put Boakye Kyeremateng Agyarko, a former vice president of the Bank of New York and a policy advisor for the NPP in 2016, in the new top spot.

Though all ministerial appointments have yet to be confirmed, Agyarko has already stated his intention to end dumsor within the year, and to establish a reserve power capacity. “We have to make sure that energy is produced affordably [for] industry particularly,” he said, according to Ghana Web.

Akufo-Addo has also announced plans for the former CEO of Kumasi Asante Kotoko, Dr. Kofi Koduah Sarpong, to replace Alexander Kofi-Mensah Mould as CEO of the Ghana National Petroleum Corporation (GNPC). Leadership changes for the Ghana National Gas Company, the Energy Commission and other leading entities are imminent.

The NPP’s planned changes for the oil and gas industry include:

Passing a “Right to Information” bill with an aim to improve transparency in the management of oil and gas resources;

Accelerate oil production in the Volta, Keta and Accra Basins to increase the country’s production and industrialize these areas;

Increase oil and gas revenues from TEN and Sankofa fields;

Develop the Western Region into a regional oil services hub with a port, including the relocation of the GNPC headquarters to this region;

Invest in education and skills of Ghanaians to manage the oil and gas sector;

Ensure the effective implementation of the petroleum price deregulation policy;

Allocate revenue from oil to infrastructure, health, education and agriculture between 2017 and 2020.

Plans for the power industry include:

End power outages in the short-term by restructuring debts and securing commitments for a reliable supply of fuel;

End power outages in the long-term by conducting a technical audit on all power infrastructure and developing and implementing a 10-year power sector master plan;

Reduce taxes on electricity tariffs and re-orient energy tariff policy to reduce the burden on businesses and provide relief to households;

Develop and implement an Energy Sector Financial Restructuring and Recovery Plan, which will include a liquidity management mechanism for the Electricity Company of Ghana (ECG), Northern Electricity Department (NED) and other power generation authorities;

Build solar parks in the northern part of the country.

Still stable

Though exploration in Ghana began in 1896 with an onshore well, the success of the industry was limited until much more recently. The first significant deepwater discovery was not made until Kosmos drilled in the West Cape Three Points License in 2007 and discovered the Jubilee field. From 2008 to 2014, 23 deepwater oil and gas discoveries were made with over an 80 percent exploration success rate, according to GNPC.

Since large-scale production began in 2010, the list of global oil and gas players in Ghana has grown to include Eni, Hess, Anadarko, Tullow Oil and PetroSA. Production has recently been augmented with new oil flowing from the TEN fields starting August 2016.

Upcoming projects consistently attract funding, including a $517 million commitment by the World Bank to back Eni’s $1.2 billion Sankofa gas development in the Offshore Cape Three Points block. In fact, the World Bank estimates Ghana’s GDP could by grow by 7.5 percent this year, and ratings agency Moody’s predicts Ghana’s economy will grow by more than 6 percent by the second quarter of 2017.

Despite the uncertainty wrought by a new administration, and perhaps even because of it, Ghana is considered a bastion of stability in Africa by investors. January’s peaceful transfer of power between rival parties, one of many such transitions in Ghana, is a leading example for elections across the continent, and provides energy companies with clear political stability when making investments.